I recently shared my top predictions for the retail industry in 2019, one of which is that algorithms will take control. Retail has long been driven by merchants who followed their guts to make product decisions. These “Merchant Princes” based their decisions on art far more than on science. But as more retailers get on board with utilizing tools to leverage consumer data, accurate decisions are increasingly made based on a combination of art and science.
In its 2018 study entitled How Analytics and Digital will drive Next Generation Retail Merchandising, McKinsey stated, “Winning decisions are increasingly driven by analytics more than instinct, experience, or merchant ‘art’. By leveraging smarter tools—those beyond backward-looking, ‘hind sighting’ analysis—retailers can increasingly make forward-looking predictions that are quickly becoming the ‘table stakes’ necessary to keep up.”
Data has been available to retailers for a long time. Now, having watched Amazon pave the way, retailers are starting to see all the possibilities technology can offer. Amazon has more data on more customers than any other retailer, and they use these data to target them effectively to drive conversions. For Amazon, there is little to no intuition – it’s all data. The example that they continue to set will drive retailers even more towards the science of retail.